In Traditional management, there are two data sources: the
budget (or planned) expenditures and the actual expenditures. The comparison of
budget versus actual expenditures merely indicates what was planned to be spent
versus what was actually spent at any given time. But how much has been
produced? This approach there in no way to determine the physical amount of
work performed. It does not indicate anything about what has actually been
produced for the amount of money spent nor whether it is being produced at the
rate, or according to the schedule, originally planned. In other words, it does
not relate the true cost performance of the project. Whereas EVM has three data
sources: the budget (or planned) value of work scheduled, the actual value of
work completed, the “earned value” of the physical work completed. Earned Value
Management (EVM) is a systematic approach to the integration and measurement of
cost, schedule, and technical (scope) accomplishments on a project or task. It
provides the ability to examine detailed schedule information, critical program
and technical milestones, and cost data.
Earned Value Management is intended to provide data like
– Relate time-phased budgets to contract tasks
– Integrate cost, schedule, and technical performance
– Indicate work progress objectively like
– Are valid, timely and auditable
– Are from the internal system the contractor uses to manage
– Are at a practical level of summarization
Through EVM following questions can be answered objectively:
Knowing where you are on schedule?
Knowing where you are on budget?
Knowing where you are on work accomplished?
Earned Value needed because different measures of progress
for different types of tasks.
Need to “roll up” progress of many tasks into an overall
project status.
Need for a uniform unit of measure (work-hours).
It provides an “Early Warning” signal for prompt corrective
action.
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